Forbearance on a student loan lets you pause or reduce your monthly payments for a limited time. It is a form of relief for borrowers facing financial hardship, but interest continues to accrue on most loans during this period. Understanding how forbearance works can help you decide if it is the right option for your situation.
How Student Loan Forbearance Works
When you receive forbearance, your loan servicer allows you to temporarily stop making payments or make smaller payments. This is different from deferment, where interest may not accrue on certain federal loans. With forbearance, interest usually keeps adding to your balance, which means you will owe more after the forbearance ends.
Forbearance is available for both federal and private student loans, but the rules vary. Federal loans have specific types of forbearance, while private lenders set their own policies. You must request forbearance from your loan servicer or lender; it is not automatic.
Types of Federal Student Loan Forbearance
The U.S. Department of Education offers two main types of forbearance for federal student loans: general and mandatory.
- General forbearance: Your servicer can grant this for reasons like financial hardship, illness, or other circumstances. It is typically granted in 12-month increments, up to a total of 36 months.
- Mandatory forbearance: Your servicer must grant this if you qualify for specific situations, such as serving in a medical or dental internship or residency, or having student loan payments that exceed a certain percentage of your income.
- Student Loan Debt Burden Forbearance: For federal loans, if your total monthly payments are 20% or more of your total monthly gross income, you may qualify.
- Teacher Loan Forgiveness Forbearance: If you are serving in a teaching position that qualifies for loan forgiveness, you may receive forbearance while you work toward that benefit.
How to Apply for Forbearance
To apply for forbearance, you must contact your loan servicer directly. You will need to explain why you need forbearance and provide any required documentation, such as proof of income or medical records. The servicer will review your request and let you know if you qualify.
For general forbearance, the servicer has the discretion to grant it. For mandatory forbearance, you must meet the specific criteria. Always submit your request in writing and keep a copy for your records.
Impact of Forbearance on Interest and Payments
During forbearance, interest continues to accrue on all federal student loans, including subsidized loans. For unsubsidized loans and private loans, that interest is added to your principal balance if you do not pay it as it accrues. This is called capitalization, and it increases the total amount you owe.
| Loan Type | Interest Accrues During Forbearance? | Interest Capitalizes? |
|---|---|---|
| Subsidized Federal Loans | Yes | Yes, if unpaid |
| Unsubsidized Federal Loans | Yes | Yes, if unpaid |
| Private Loans | Usually yes | Varies by lender |
When to Use Forbearance vs. Other Options
Forbearance should be a last resort because it increases your overall debt. Before choosing forbearance, consider income-driven repayment (IDR) plans for federal loans, which base your payment on your income and may be as low as $0 per month. You might also qualify for deferment, especially if you are back in school or experiencing unemployment.
If you have private loans, ask your lender about alternative repayment options, such as interest-only payments or a temporary rate reduction. Compare the long-term cost of forbearance with these alternatives.
How Long Can You Stay in Forbearance?
For federal loans, general forbearance is usually limited to 12 months at a time, with a maximum of 36 months over the life of your loan. Mandatory forbearance may have different limits depending on your situation. Private lenders set their own limits, often up to 12 months total.
Practical Tips for Managing Forbearance
If you decide to use forbearance, take these steps to minimize the damage to your finances:
- Pay the interest as it accrues to avoid capitalization.
- Keep track of how many months of forbearance you have left.
- Set a reminder to review your options before the forbearance ends.
- Contact your servicer if your financial situation changes.
Summary
Forbearance can provide temporary relief from student loan payments, but it comes with a cost: interest keeps growing. Use it only when you have no other options, and try to pay the interest to prevent your balance from ballooning. Always explore income-driven plans or deferment first. If you need help, contact your loan servicer to discuss what is best for your situation.
Frequently Asked Questions
What does forbearance mean on a student loan?
Forbearance is a temporary pause or reduction in your student loan payments, granted by your loan servicer, usually due to financial hardship. Interest continues to accrue on your loans during this time.
Does interest accrue during student loan forbearance?
Yes, interest accrues on all federal student loans during forbearance, including subsidized loans. If you do not pay the interest, it may be added to your principal balance, increasing what you owe.
How do I apply for student loan forbearance?
You must contact your loan servicer and request forbearance. You will need to explain your situation and may need to provide documentation, such as proof of income or medical records.
What is the maximum time for student loan forbearance?
For federal loans, general forbearance is limited to 12 months at a time, with a maximum of 36 months total. Private lenders set their own limits, which are often shorter.
Is forbearance better than deferment?
Deferment is often better because interest may not accrue on subsidized federal loans during deferment. Forbearance should be used only when you do not qualify for deferment or other options like income-driven repayment.
